The U.S. technology industry is one of the most dynamic in the world, particularly with respect to mobile and Internet-based computing, two areas that are evolving at breakneck speed. Things can happen very quickly in the tech space: one day you’re up, the next day you’re down. Take Apple and Google, two tech titans currently battling for dominance in the mobile-Internet wars. Over the past several months, Google shares have increased by nearly 20% — last week topping $800 — while Apple shares have fallen by more than 30%.

Much of the movement happened in the past few months of 2012, as large investors, including hedge funds, pulled money out of Apple and, in some cases, poured it into Google, in order to maintain exposure to the large-capitalization technology sector, according to Colin Gillis, senior technology analyst and director of research at BGC Financial.

“As Apple started selling off, Google started taking off,” Gillis says in a phone interview. “If you’re an investor and you want exposure to large-cap tech stocks, there aren’t that many places you can go.”

The Apple sell-off is being driven in part by growing concerns about whether products like the iPhone and the iPad — devices that Apple is only incrementally improving — can continue to power revenue and profit growth, or whether Apple needs new, breakthrough products. After all, during his legendary career, Apple’s late co-founder Steve Jobs radically disrupted several markets with iconic products like the iPod and iTunes, and the iPhone and iPad, which set the standard for tech innovation. Current Apple CEO Tim Cook has yet to introduce a truly breakthrough new product of his own.

“Tim Cook keeps alluding to the company’s great product pipeline, but there’s been an innovation vacuum for a couple of quarters,” says Gillis. “I’m not going to say the story is over — let’s give it one more year — but we’re certainly in a period of incrementalism with Apple.”

Scott Kessler, head of technology research at S&P Capital IQ, also raised the issue of incrementalism in Apple’s product cycle. “There are some well-founded concerns about the company’s ability to innovate, especially in light of Steve Jobs’ passing,” Kessler says in a phone interview. “It’s not just about the next big thing, but the next big category. People have been looking for new products and new categories for some time, but they haven’t seen them.”

It doesn’t help that Apple has experienced several quarters of slowing growth, which has further spooked investors. Last quarter, Apple generated profit of $13.1 billion, but that was flat compared with the year-ago period — the company’s lowest rate of profit growth in a decade. Google, by contrast, continues to report solid growth thanks to its dominant search engine and online advertising business. Last quarter, net income increased 13% on revenue of $14.42 billion, a 36% increase over one year ago. Google has now jumped ahead of Apple as the most widely held long technology hedge-fund position, according to Goldman Sachs’ new Hedge Fund Trend Monitor report, which analyzed 725 hedge funds with $1.3 trillion in gross assets.

In short, Apple expectations are returning to earth. “Apple has had a tremendous run from 2001 until the end of last year,” says Kessler. “People want the company to invent a new category. In the past, they’ve done that so frequently and successfully that when they don’t seem to do it as much or as profoundly, questions arise.”

Meanwhile, Google is hot. For example, Google’s new Chromebook Pixel laptop is garnering positive reviews. (“Thank you, Google. For obsoleting my MacBook,” as one CNET writer put it.) And the company’s Google Glass wearable computing project — high-tech Internet-connected specs — is generating the sort of buzz usually reserved for Apple products. The futuristic eyewear will be available to consumers by the end of 2013, just in time for the holiday shopping season, according to several reports. Here’s the latest official Google Glass video:

The Google buzz has been further amplified by chatter about the tech giant’s massive, 42-acre (17 hectare) expansion to its Googleplex headquarters at NASA’s Ames Research Center in Silicon Valley. That’s a convenient location, because it’s right next door to NASA’s Moffett airfield, where Google executives keep no fewer than six private planes, including a 757, a 767 and several Gulfstream jets, according to a report last year from NBC Bay Area. (Cash-flush Apple also has an ambitious new headquarters due in 2016 under development.)

“Google is getting a lot of attention and a lot of kudos for taking risks and trying something new,” says Kessler. “While Apple is reducing screen size [see the iPad Mini], Google is introducing a whole new product with wearable technology, which reinforces the perception that it’s being innovative.”

As for Apple, it’s telling that Cook has been on something of a p.r. tour in recent months, appearing on the cover of Bloomberg BusinessWeek and showing up for a rare on-camera interview with Brian Williams of NBC News. In an apparent attempt to burnish the company’s image, Cook recently announced plans to spend at least $100 million to “do one of our existing Mac lines in the Unites States.” (To put that into perspective, Apple made over $50 billion in profit over the past 12 months.) And earlier this month, Cook sat with First Lady Michelle Obama during President Obama’s State of the Union address.

But Cook is going to need more than high-profile appearances if he wants to restore Apple’s mojo. Incremental updates to existing product lines are well and good, but investors — and consumers — are looking for the company to unveil truly disruptive new products, as it did with the iPod, iPhone and iPad. There has been chatter that Apple might introduce a new TV product, or perhaps a “smart watch,” but thus far those are merely rumors. It’s time for Apple’s next revolutionary product to become a reality.